Legal and HR Working Group Breakfast Seminar - Update on Draft Employment Contract Law Go back »

2007-01-26 | Beijing

Legal and HR Working Group Breakfast Seminar - Update on Draft Employment Contract Law

The Chinese Draft Employment Contract Law has been one of the most talked about pieces of legislation of last year. The National People’s Congress (NPC) received over 190,000 comments from organisations and individuals when it issued a public call for comments on the first draft of the Labour Contract Law. On Thursday 25th February the European Union Chamber of Commerce in China hosted a Breakfast Seminar on the topic of the recently released second draft of the Employment Contract Law. The European Chamber was pleased to present two guest speakers, Dr Andreas Lauffs, Partner and Head of the China Employment Practice at Baker & McKenzie and Luka Lu of Capital Associates. The purpose of this of the seminar was to keep the business community informed of revisions to this legislation, which will have a considerable effect on employers in China.

The declared aim of the Employment Contract Law is to protect workers and create harmony between employer and employees. The first draft law has been debated at the very highest levels of government in China and throughout the international community. However, the second draft contains many revisions, is seen to be much more moderate. The Breakfast Seminar provided a forum for interested parties to hear about these revisions from expert sources and the evident interest was borne out by the fact that the event was completely sold out.

The first speaker was Dr Andreas Lauffs, who outlined changes to the draft legislation and the possible impact of the new law on employment relations in China. He described the progress of the law from its initial draft from December 2005 to the current version released in December 2006. Differences between the two drafts include: adding a provision that fixed-term contracts may be extended only once; eliminating restrictions on non-compete covenants and removing the link between job position and permitted length of probation period. The revisions are substantial and result in an altogether more moderate proposal. Dr Lauffs explained that the law committee will probably now only make limited revisions based on feedback obtained from the second reading and the legislation may be promulgated by the end of this year. Dr Lauffs commended the draft law for being in-line with current EU practices but commented that there are a number of problems with the draft due to possible misinterpretations of the language and the ambiguity of certain points. Furthermore he stressed the need for proper compliance and implementation of this legislation. 

To view Dr Lauffs' presentation click here.

Luka Lu of Capital Associates gave some practical information on how employers can prepare for the new regulations. She advised companies to take a proactive approach by updating their contracts, employee handbooks and rules in advance of the law’s promulgation. This will lead to clearly defined working practices and avoid some potential labour disputes. Ms Lu also recommended that companies look into and improve their recruitment practices. Under the new law it will be difficult for employers to terminate contracts and will not be able to maintain keeping employees on short-term contracts. As such it is imperative that companies place the right person in the right position in the initial stage of employment. Overtime may also become a point of contention in the future and employers should avoid asking employees to work more than 36 hours per week. Ms Lu gave other pointers such as clarifying holiday leave applications and maintaining written copies of all management/staff agreements as opposed to electronic records, which are subject to loss and malfunction. 

The seminar was a great success and the European Chamber hopes to continue providing forums for updates on this key issue. The European Union Chamber of Commerce in China understands the importance of this legislation and will continue to lobby the relevant bodies to ensure the Employment Contract Law is a fair legislation and is properly implemented and adhered to. For further information and to read an unofficial translation of the current Draft Employment Contract Law please click here.